||Ask the Dollar Diva
How do I create a credit card
Dear Dollar Diva,
I want to pay off a credit card debt making more than the minimum
payment each month. Where can I find a calculator that will help
me figure out a payment plan and also give me an amortization schedule
that shows the interest and principal amounts of each of my monthly
Bankrate.com has a number of calculators
to help with personal finance issues, and the one the Dollar Diva
thinks would work best for you is "The
true cost of paying the minimum."
Here's what you'll need to know to use the calculator:
- What is the credit card balance?
- What is the interest rate?
- Your minimum payment is calculated at what
percentage of your total balance?
- The minimum payment
- What fixed payment can you afford to make
Select a payment schedule based on either the credit
card company's minimum payment or the higher fixed payment you are
committed to making each month.
The calculator will give you the number of months
before you are rid of your debt and how much of your total payments
will be interest. It produces a month-by-month amortization schedule.
Anyone who is currently making the minimum payments
on a credit card should take advantage of this powerful tool. You
may suspect that you're doing yourself a disservice, but the Diva
expects you will experience an epiphany when you actually see the
numbers with your own eyes.
Let's say someone has a credit card balance of $10,000,
an annual interest rate of 18 percent and a minimum monthly payment
of 2.5 percent of the balance. Suppose he stopped charging on the
card and paid the ever-descending minimum? What if he kept paying
the current monthly payment of $250, or even upped it to $350?
| Monthly payment
|| Number of years to pay off
|| Amount of interest he would
(currently $250, decreasing a little each month)
31 years + 10 months
5 years + 2 months
3 years + 2 months
Some truths are self-evident: paying the minimum monthly
payment is enormously profitable for the credit card company and
damn expensive for the credit card holder. That's why the minimum
payments are set at such low rates.
Once you grasp this truth and get mad as hell at the
credit card companies for milking you dry, you're ready for the
next step: working on getting those balances paid off as quickly